Executive Summary

Q3 revenue of $671.2M beat S&P Global consensus by ~$4.4M (+0.7%); EPS was in line at $(0.05). Public Cloud grew 1% YoY and sequentially while Private Cloud declined 3% YoY. Non-GAAP operating profit rose 17% QoQ to $32M on cost efficiencies, though gross margin was down 120 bps YoY due to mix and lower cost absorption .
Guidance for Q4 implies flat QoQ revenue ($664–$678M) and non-GAAP loss per share of $(0.03)-$(0.05); both sit broadly in line with S&P Global consensus (Rev ~$672.6M; EPS $(0.0289)) [functions.GetEstimates].
Cash generation improved: Q3 cash from operations $71M; liquidity ended at $386M (cash $99.5M). Free cash flow was $43M in the quarter .
Strategic catalysts: accelerated AI product cadence (AI Launchpad; RAISE security engine), healthcare/EHR wins, and a new CEO positioning the company around governed AI and sovereign workloads across hybrid multicloud .

What Went Well and What Went Wrong

What Went Well
- Revenue and EPS at/above expectations; non-GAAP op profit hit high end of guide and rose 17% QoQ; public cloud revenue exceeded guided range and grew 1% YoY and QoQ .
- Bookings momentum held: ACV bookings +5% YoY; private cloud signed large, long-term enterprise and sovereign wins, with sequential margin improvement on cost control .
- Product velocity: launched AI Launchpad (managed path from PoC to production), RAISE (AI-driven SOC), and Cloud Management Platform upgrades—expanding AI/services mix and addressable market .
What Went Wrong
- Gross margin contracted 120 bps YoY (to ~19.4%) on lower private cloud cost absorption and unfavorable mix in public cloud; public cloud segment margins also compressed modestly YoY .
- Private cloud revenue declined 3% YoY as customers transition off legacy platforms; though sequential operating margin improved, volume pressure remains a headwind .
- Liquidity trended lower ($473M in Q1 → $414M in Q2 → $386M in Q3) and cash fell to $99.5M, underscoring the importance of sustained cash generation amid a high debt load (~$2.77B → $2.74B non-current) .

Financial Results

Overall P&L and Margins

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$675.8	$665.4	$666.3	$671.2
Net Loss per Share - GAAP ($)	$(0.82)	$(0.31)	$(0.23)	$(0.28)
Non-GAAP Loss per Share ($)	$(0.05)	$(0.06)	$(0.06)	$(0.05)
Loss from Operations ($mm)	$(173.7)	$(38.4)	$(25.1)	$(33.9)
Non-GAAP Operating Profit ($mm)	$32.2	$25.6	$27.3	$32.0
Adjusted EBITDA ($mm)	$65.8	$61.3	$64.4	$69.3
Gross Profit Margin %	20.4%	19.1%	19.4%	19.4%

Q3 vs S&P Global Consensus

Metric	Consensus*	Actual	Surprise
Revenue ($USD Millions)	$666.8*	$671.2	+$4.4 (+0.7%)
EPS ($)	$(0.0506)*	$(0.05)	+$0.0006

Segment Performance and Profitability

Segment	Q1 2025	Q2 2025	Q3 2025
Public Cloud Revenue ($mm)	$415.6	$416.6	$421.6
Private Cloud Revenue ($mm)	$249.8	$249.7	$249.6
Public Cloud Non-GAAP Segment Op Profit ($mm, % margin)	$17.3 (4.2%)	$16.2 (3.9%)	$14.0 (3.3%)
Private Cloud Non-GAAP Segment Op Profit ($mm, % margin)	$61.0 (24.4%)	$61.5 (24.6%)	$67.2 (26.9%)

Key KPIs and Cash Metrics

KPI	Q1 2025	Q2 2025	Q3 2025
Cash from Operations ($mm)	$13	$8	$71
Capital Expenditures ($mm)	$27	$31	$34
Cash & Equivalents, period-end ($mm)	$128.0	$103.9	$99.5
Total Liquidity ($mm)	$473	$414	$386
Adjusted EBITDA ($mm)	$61.3	$64.4	$69.3
Weighted Avg Diluted Shares (mm, GAAP)	231.9	238.0	240.4

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue ($mm)	Q4 2025	n/a	$664–$678	New
Private Cloud Revenue ($mm)	Q4 2025	n/a	$244–$252	New
Public Cloud Revenue ($mm)	Q4 2025	n/a	$420–$426	New
Non-GAAP Operating Profit ($mm)	Q4 2025	n/a	$32–$34	New
Non-GAAP Loss Per Share ($)	Q4 2025	n/a	$(0.03)–$(0.05)	New
Non-GAAP OI&E ($mm)	Q4 2025	n/a	$(46)–$(50)	New
Non-GAAP Tax Expense Rate	Q4 2025	n/a	26%	New
Non-GAAP Weighted Avg Shares (mm)	Q4 2025	n/a	242–244	New

Consensus context for Q4: revenue ~$672.6M* (within guide), EPS $(0.0289)* (slightly better than the midpoint $(0.04) guide) [functions.GetEstimates] .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2025)	Trend
AI/Technology Initiatives	Launched Rackspace AI Business (private AI platform). Q1/Q2 commentary emphasized turnaround and bookings growth (+9% in Q1; +16% in Q2) .	Introduced AI Launchpad (PoC→production), advanced AI security via RAISE, continued FAIR MCP acceleration; emphasis on governed AI across hybrid/sovereign .	Expanding product cadence and enterprise AI focus
Regional/Go-to-Market	Solid pipeline across both BUs; services-first positioning .	Public Cloud bookings +2% QoQ, led by Americas; services revenue +3% driving growth .	Americas-led execution improving
Regulated/Sovereign Focus	N/A specific in Q1 PR; broader hybrid mention .	CEO prioritizes regulated and sovereign workloads; VMware Cloud Foundation alignment for control plane and residency needs .	Clear focus and positioning
Healthcare/EHR	N/A in Q1 PR;	Dell Medical School selects RXT to host/manage Epic EHR and adjacent workloads; launched EHR Cloud Enterprise .	Vertical momentum building
Margins/Costs	Non-GAAP op profit +83% YoY in Q1; +34% YoY in Q2 .	Non-GAAP op profit +17% QoQ; gross margin down 120 bps YoY on mix and cost absorption .	Sequential improvement, YoY pressure persists

Management Commentary

“We delivered third quarter results at or above expectations, generated strong cash flow, and sustained momentum across the business.” — Gajen Kandiah, CEO .
“Rackspace is advancing a trusted compute fabric for hybrid multicloud… deepening our work with VMware Cloud Foundation… while delivering modern services for AI, data, and security.” — Gajen Kandiah, CEO .
“Total company GAAP revenue of $671 million was up 1% sequentially, but down 1% year over year… non-GAAP operating profit was $32 million… up 17% sequentially… non-GAAP loss per share was $0.05… cash flow from operations was $71 million, and free cash flow was $43 million.” — Mark Marino, CFO .
“Our ambition is clear. We will be the leading hybrid multi-cloud partner for regulated, sovereign, and mission-critical workloads… We will be the partner of record when it matters.” — Gajen Kandiah, CEO .

Q&A Highlights

The call concluded without a live Q&A (no questioners in the queue), limiting incremental disclosures beyond prepared remarks .
Management reiterated Q4 guidance: revenue $664–$678M, non-GAAP operating profit $32–$34M, non-GAAP EPS loss $(0.03)–$(0.05), 26% non-GAAP tax rate, and 242–244M non-GAAP share count .
CFO clarified gross margin headwinds (lower cost absorption; mix in public cloud) and sequential non-GAAP operating profit tailwinds (cost efficiencies and lower corporate expenses) .

Estimates Context

Q3 beat on revenue and met EPS: revenue $671.2M vs $666.8M consensus*, EPS $(0.05) vs $(0.0506)* [functions.GetEstimates] .
Q4 guidance brackets consensus: revenue guide midpoint ~$671M vs $672.6M consensus*, non-GAAP EPS loss midpoint $(0.04) vs $(0.0289)* (guide slightly more conservative on EPS) [functions.GetEstimates].
Estimate revisions may tilt modestly positive on revenue (public cloud strength) but EPS likely little changed given guidance framing and ongoing mix/margin dynamics .

Note: * Values retrieved from S&P Global.

Key Takeaways for Investors

Modest top-line outperformance with in-line EPS; sequential improvement in non-GAAP operating profit and Adjusted EBITDA supports the turnaround narrative .
Mix remains a key driver: public cloud services growth aided revenue, but mix and private cloud cost absorption compressed gross margins YoY; watch segment margins as AI/services scale .
Cash generation inflected positively (CFO: $71M CFO and $43M FCF in Q3) even as liquidity declined to $386M and cash to $99.5M; sustainability of FCF will be critical given leverage .
Product cadence in AI and security (AI Launchpad, RAISE) plus healthcare/EHR vertical traction and sovereign wins enhance medium-term growth optionality and narrative .
Q4 outlook is consistent with consensus; near-term stock catalysts likely hinge on continued bookings growth, AI services wins, and any signs of margin stabilization/improvement in public cloud .
Leadership transition to a CEO with deep services/AI pedigree supports the strategic pivot toward governed AI across hybrid/sovereign workloads; execution and customer conversions are the next proof points .
Balance sheet remains leveraged (non-current debt ~$2.74B); maintaining EBITDA momentum and positive operating cash flow is essential for flexibility .

Appendix: Additional Context from Q3-Period Press Releases

Cloud Management Platform upgrades to RMC to enhance observability, automation, and flexible consumption for hybrid multicloud .
RAISE (AI-driven security engine) enhances SOC capabilities; third-party recognition in ISG Provider Lens .
FAIR MCP Enterprise Accelerator available in AWS Marketplace, streamlining enterprise agentic AI deployments .
AWS Automotive Competency achieved, bolstering industry credentials; case study in shopfloor IT modernization for a German OEM .

Rackspace Technology, Inc. (RXT)·Q3 2025 Earnings Summary